Agilent to cut 1300 jobs

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Dramatically narrowing its corporate focus, Agilent Technologies
is shedding its chip unit and spinning off other assets as it
concentrates on the test-and-measurement business at its historic
core.

About 1300 jobs will be cut in the reorganisation, which will
take the company back to roots that extend to the earliest days of
its former parent, Hewlett-Packard Co. Agilent was spun off from HP
in 2000.

"It's been true since the inception of the company, we've
performed more like a sluggish semiconductor company than the
world's premier measurement company," Adrian Dillon, Agilent's
chief financial officer, said on Monday. "It has been a case of the
semiconductor tail wagging the measurement dog."

Agilent is selling its semiconductor business to the buyout
firms Kohlberg Kravis Roberts & Co. and Silver Lake Partners
for $2.66 billion ($A3.46 billion). The division builds chips for a
range of products, from mobile phones and computer mice to optical
networking gear.

Agilent also agreed to sell its 47 per cent stake in San
Jose-based lighting company Lumileds to Royal Philips Electronics
for $US950 million and the repayment of $US50 million in debt.
Lumileds had sales of $US324 million and operating profit of $US83
million over the last 12 months, Philips said.

Agilent also plans to spin off its system-on-a-chip and memory
test businesses in 2006.

"Today starts a new chapter of Agilent," said Bill Sullivan, the
company's chief executive. "We have made decisions today for us to
be able to focus on our core that we have been a leader in for the
last 65 years."

Agilent said it would use the cash proceeds of its
reorganisation for a $US4 billion share repurchase program, and it
will call its $US1.15 billion convertible debt. The repurchase will
begin immediately, while the call is expected to cut its
outstanding shares by 36 million.

The company, which expects about $US200 million in restructuring
costs to be largely offset by proceeds from its asset sales,
expects to save $US450 million. It said the job cuts - about
4.6 per cent of its 28,000 employees - will be made through
transfers to the divested businesses, attrition and layoffs.

Agilent expects the chip divestiture to be completed by October
31, the end of its current fiscal year.

Agilent's test-and-measurement business sells gear that
scientists, doctors and electronics engineers use to make precise
measurements for complex analyses. The company says 70 per cent of
all mobile phones are tested on Agilent equipment.

Not only was that business healthy, but it is also less volatile
than the segments Agilent was exiting, said Richard Chu, an analyst
at SG Cowen.

"The overwhelming argument they can make is, the presence of
these other businesses diluted their value," he said.

Agilent's roots predate its independence by decades. In fact,
some argue that its test-and-measurement business is more in line
than today's HP with the goals William Hewlett and David Packard
had when they launched their Silicon Valley company in a Palo Alto
garage in 1938.

When HP announced its intent to spin off Agilent in 1999,
Agilent seemed poised for success. Its initial public offering
raised $US2.1 billion and set Silicon Valley records.

But Agilent was hit hard by the tech downturn, and it was
undertook several rounds of sackings - totalling 12,000 jobs -
in its quest to become profitable.

It lost a total of $US3.1 billion in fiscal years 2002 and 2003
before rebounding with a profit of $US349 million in fiscal
2004.